Marketing 351: ch 21 Setting Prices

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A retailer of Real Dry deodorant prices it at $2.00; it costs the retailer $1.40. What is the approximate markup as a percentage of selling price?

30 percent

J.C. Penny's pays $16.50 for a six-ounce bottle of cologne and sells it for $25.95. Its markup as a percentage of cost is approximately ___ percent for this product

57

Which of the following pricing objectives sets prices to recover cash as quickly as possible?

Cash flow

The manager at Best Buy puts a sign up next to a Pioneer audio system that reads, "Only $199.99! $60 less than Circuit City." This is an example of what type of pricing strategy?

Comparison Discounting

If PepsiCo sets its 12-pack at $3.99 to match the price charged by Coca-Cola, Pepsi is using which pricing method?

Competition-based

If Wrigley set its pricing objective as attaining 38 percent of the chewing gum market, what else would be needed to make this a true pricing objective?

Identification of a time period for accomplishment

A firm establishes which of the following pricing objectives to maintain or increase its product's sales in relation to total industry sales?

Market share

Which of the following would be used in setting price of a new product if considerable competition is expected? -psychological pricing -penetration pricing -odd-even pricing -price skimming -prestige pricing

Penetration pricing

Breyer's produces a variety of ice cream flavors and lines of varying qualities. The higher quality ice cream varieties are priced higher than the basic ones. Breyer's is using ___ to price its ice cream

Premium pricing

A manager at JC Penney discovers that Sears has reduced the price of its children's Levi's from $31.99 to $24.99, according to an advertisement in the Sunday newspaper. She immediately phones her store and instructs the salesperson on duty to put a sign up next to their children's Levi's that reads, "SALE: $24.99." This is an example of what pricing strategy?

Random discounting

A Macy's manager designs the casual clothing department such that one of Macy's private label pairs of jeans, priced at $24.99, is positioned next to a national brand of jeans, such as Levis, priced at $39.99What is the manager attempting to accomplish?

Reference pricing strategy

Which of the following statements about markup pricing is correct?

The use of similar markups reduces price competition

If Kroger Food Stores advertises 2-liter bottles of Pepsi for $0.89 to generate store traffic that will purchase other items at regular prices, the grocer is using

a price leader

Odd-even pricing is

a psychological printing strategy

When Gabriella logs on to Dell's website, she sees a notebook model priced will below $1,000. As she continues through the site to view the other options, she realizes the first one she saw was the cheapest model available, but she of course wants more features. Dell is utilizing

bait pricing

When a company prices one item in a line low with the intention of selling a higher-priced item in the same line, it is using

bait pricing

When Mia and Shane are planning their honeymoon, their travel agent tells them that if they buy a special package, their trip to Paris includes meals, tickets to the theater, and a rental car in addition to airfare and a hotel. This is an example of the use of

bundle pricing

Some grocery stores collect data on competitive prices

by using full-time comparison shoppers

Maintaining or increasing market share

can be achieved even if industry sales are flat or decreasing

A market share objective

can be used effectively whether total industry sales are rising or falling

Lexmark sells some of its color printers for about $100, but the refill cartridges cover over $30 each. Lexmark's pricing strategy would be best labeled as

captive pricing

Pricing the basic product in a product line low while pricing related items at a higher level is called

captive pricing

Gambrell Designs thinks its new product, the Automatic Dog Walker, will have a short product life cycle; therefore, its marketing department sets its primary pricing objective as

cash flow

Companies that focus on particular product categories and rely on everyday low pricing to acquire a large market share through aggressive and competitive pricing strategies are often referred to as

category killers

Showing a product's price along with its previous price, the price of a competing brand, or the price at another retail outlet is called

comparison discounting

When products in an industry are relatively homogeneous and price is a key purchase consideration,

competition based-pricing becomes more important

If General Mills looks at Kellogg's cereal prices as the primary method of determining its own prices, General Mills is using

competition-based pricing

When determining markup as a percentage of cost, divide the markup amount by

cost

For custom-made equipment or commercial construction projects, which pricing method is most likely used?

cost-plus

Steinway produces concert grand pianos, often using the custom materials and designs desired by a specific customer. The average price of these pianos runs about $50,000 depending on the exact piano. What type of pricing does Steinway most likely use for these pianos?

cost-plus

The federal government often uses ___ pricing when it grants defense contracts

cost-plus

When a seller's costs are usually determined during or after a product is made and then specified percentage or dollar amount is added to the cost to establish a price, an organization is using ___ pricing.

cost-plus

Goods that are priced primarily based on the way they have always been priced are examples of

customary pricing

The three primary bases for developing prices are

demand, competition, and cost

Amtrak prices its tickets so that it is less expensive to travel on weekends than during the week when there is heavy business travel. This illustrates ___ pricing

demand-based

If General Motors determines that it wants to sell 200,000 Chevrolet Acadias and sets the price at $29,500 because it knows that at that price it will reach that goal, the firm would be using a ___ pricing method

demand-based

If a product is priced based on how many or how few people want it at a particular time and place, ___ pricing is being used

demand-based

During July and August, Lakewood Links Golf Course, located in S.C., offers weekday rates of $13 for a round of golf with a cart. During the rest of the year, the weekday rates are between $25 and $35. This is an example of the use of

demand-based pricing

When establishing prices, a marketer's first step is to:

develop pricing objectives

Executives in Japan decided to price Lexus luxury cars in the US at $55,000 while pricing them at $66,000 in their own country. This is an example of

differential

The fact that senior citizens are charged a lower price at movie theatres than younger adults is an example of ___ pricing

differential

Sony management decided to use skimming as a pricing strategy for its newest line of HDTV sets. It should be aware that this strategy does NOT

discourage competitors from entering the market

The decision of Macy's to use even prices such as $60 for a Ralph Lauren Polo shirt is an application of odd-even pricing, and even prices are often used to

give a product an upscale or exclusive image

Pricing strategies and methods

help direct and structure the selection of a final price

A penetration pricing strategy is particularly appropriate when demand is

highly elastic

Competitors' prices, along with the marketing variables they emphasize, are determining factors in

how important price will be to customers

A product is a price leader when

it is sold at less than cost in the hope that sales of other products will increase

A cost-based pricing method commonly used in retail is called

mark-up prices

If Nabisco had established a pricing objective of selling one out of every three crackers consumed in the world, it would have established an objective based on

market share

Products such as light bulbs, canned soft drinks, and ice cream sandwiches are usually priced using

multiple-unit pricing

Marketers at organization engaged in nonprice competition

need competitive price information to make sure that their products are priced at approximately the same levels as the prices of competing brands

Maria recently put her house on the market at an asking price of $260,000. She realizes, however, that in order to sell the house, she may have to use

negotiated pricing

Price skimming and penetration pricing are both strategies used for

new-product pricing

Marketers must take steps to make sure that the pricing objectives they set are consistent with the organization's ___ objectives and ___ objectives

overall; marketing

The management at Allied Electronics is having difficulty in raising the introductory price on system components to cover the increased costs of producing the sensing devices for home security systems. Apparently, Allied using a(n) ___ strategy in pricing these components

penetration

All of the following are pricing strategies used by companies establishing prices of multiple products within a product line except: -premium pricing -price lining -captive pricing -bait pricing -penetration pricing

penetration pricing

If Nabisco wants to quickly gain a large market share with its new line of reduced-fat snack crackers, it should use

penetration pricing

A problem associated with ___ is that consumers can predict when prices will be lowered and delay purchases until that time

periodic discounting

The "White Sale" that many department stores have every year a few weeks after Christmas is an example of

periodic discounting

A product that has more features than those of its competition, or that is perceived to be higher quality, warrants using which type of pricing strategy?

premium pricing

If REVO sets the price for its sunglasses at $240, it is using psychological pricing to convey

prestige

Which of the following pricing strategies often results in a retailer losing money on the product?

price leader

To attract customers into a store, Safeway advertises its milk at less than cost, hoping that customers will purchase other groceries as well. This pricing strategy is called

price leader pricing

When an organization sets a number of prices for selected groups of merchandise, this is commonly referred to as

price limiting

The pricing strategy that assumes that demand is relatively inelastic over certain price ranges is called

price lining

All of the following are psychological techniques except -customary pricing -prestige pricing -reference pricing -odd-even pricing -price skimming

price skimming

If Norelco introduced a new electric razor that sonically removes hair and priced is first at $175 and then at $150 before reducing the price to $100, the firm's initial pricing strategy is known as

price skimming

When Sharp first introduced its line of graphing calculators, it set the price quite high; it has lowered the price as competitors have entered the market. The pricing strategy initially used by Sharp is called

price skimming

When business charge the highest possible price that customers who really want the new product will pay, they are using

price skimming

Reference pricing is

pricing a product at a moderate level and positioning it next to a more expensive model or brand

If an organization sets prices to recover research and development expenses and establish a premium quality image for its product, it would be using a ___ pricing objective

product quality

Research indicates that both market share and ___ are good indicators of profitability

product quality

The pricing of Clinique make up considerably higher than brands such as Cover Girl, Revlon, and Maybelline is used to communicate ___, which is the company's primary pricing objective

product quality

What type of pricing strategy is used in situation where demand for a product is price inelastic and the seller has an ethical responsibility not to overcharge the client

professional pricing

Westin Inc. has an objective of achieving a 25 percent return from its overall sales. This is an example of a ___ pricing objective

profit

Price leaders, comparison discounting, and special-event pricing are applications of

promotional pricing

When a company attempts to influence a consumer's perception of price to make a product's price more attractive and reduce "sticker shock," it is using a ___ pricing strategy.

psychological

For customers, value is function of the product's

quality attributes

A marketer is most likely to set prices according to a cash-flow objective when a

quick return on investment is desired

If a business decides to reduce its prices once in a while on unsystematic basis, it is using

random discounting

Most pricing objectives based on ___ are achieved by trial and error because not all cost and revenue data are available when prices are set

return on investment

Markup is measured either as a percentage of ___ or a percentage of ___

selling price; cost

A sale at The Bon Marche the day after Thanksgiving to kick off the Christmas season would be considered

special-event pricing

Maintaining a certain market share, meeting competitors' prices, maintaining a favorable image, and achieving price stability are all associated with a ___ pricing objective

status quo

What type of pricing objective would an organization use if it were in a favorable position and desired nothing more?

status quo

Which pricing objective de-emphasizes price and can lead to a climate of nonprice competition in an industry?

status quo

Which type of pricing objective can reduce a firm's risk by helping to stabilize demand for its products?

status quo

Running a bike sale in order to generate enough cash flow to pay creditors is typical in a situation in which a firm's primary pricing objective is

survival

When a company adjusts price levels so that it can increase sales volume to levels that match the organization's expenses, it is said to employ a ___ objective

survival

A sale that advertised prices "up to 65% off" the original prices uses

tensile pricing

A price-skimming strategy assumes that

the initial demand is highly inelastic

Which of the following is a requirement for setting pricing objectives?

the objectives should be explicitly stated

Marketers improve their ability to establish prices appropriately when

they know prices charged for competing brands

Bundle pricing may be perceived to be of value by customers because

they prefer buying a combination of bundled products in a single transaction, which saves time, effort, and perhaps money

Competition-based pricing is

used when costs and revenues are secondary to competitors' prices

When consumers are making do with less expensive products and shopping more selectively, manufacturers and retailers must focus on the ___ of their products

value


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